IT solutions provider CDW (NASDAQGS:CDW) reported Q1 CY2026 results beating Wall Street’s revenue expectations, with sales up 9.2% year on year to $5.68 billion. Its non-GAAP profit of $2.28 per share was in line with analysts’ consensus estimates.

Is now the time to buy CDW? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

CDW’s first quarter was marked by robust top-line growth, driven by heightened demand for infrastructure hardware and ongoing AI investments, yet accompanied by market disappointment due to margin pressures and expense patterns. Management attributed revenue gains to agility in securing hardware supply and adapting to customer priorities, particularly as organizations accelerated AI adoption and infrastructure modernization. CEO Christine Leahy noted, “Customers navigated the operational challenge of moving AI from exploration into real production environments,” highlighting that the shift toward heavier hardware mix and supply chain complexities weighed on higher-margin services and software attach rates.

Looking ahead, CDW’s guidance is shaped by expectations for continued strength in hardware demand, ongoing AI-driven client projects, and gradual normalization in customer spending patterns. Management emphasized the rollout of the Geared for Growth initiative, which aims to embed AI across the operating model to enhance productivity and operating leverage in the second half of the year. CFO Albert Miralles stated, “We expect benefits from Geared for Growth enterprise initiatives to begin flowing through in the back half of this year,” while cautioning that macro uncertainty and supply chain dynamics could introduce variability in performance as the year progresses.

Key Insights from Management’s Remarks

Management emphasized that Q1 performance reflected strong hardware demand, customer urgency to address AI infrastructure, and strategic efforts to modernize operations, with expense timing and margin mix as key challenges.

• Infrastructure hardware surge: The quarter’s growth was driven by significant customer investment in networking, storage, and servers, fueled by urgent AI infrastructure needs and concerns over memory supply and pricing.
• Services mix impact: As customers prioritized hardware purchases, higher-margin services and warranties became lower priorities, leading to a less favorable revenue mix and limiting margin expansion despite record gross profit.
• Segment diversity aided resilience: CDW’s broad exposure across commercial, government, education, and international markets helped offset sector-specific challenges, with commercial and state/local government showing particular strength, and international operations growing double digits.
• AI as operating capability: The company advanced its AI-first strategy by embedding AI into sales processes and operations, exemplified by the rollout of the CDW Assist Super Agent and the Geared for Growth modernization initiative, which is expected to drive future productivity gains.
• Supply chain and backlog dynamics: Elevated customer urgency led to inventory build and higher backlog, as shipment delays and hardware prioritization resulted in undelivered orders carrying into Q2, impacting both revenue recognition and near-term margin mix.

Drivers of Future Performance

CDW’s outlook is anchored in sustained hardware demand, AI adoption across customer segments, and the anticipated impact of its AI-driven operational initiatives, tempered by macroeconomic and supply chain uncertainties.

• AI and hardware demand normalization: Management expects the hardware-driven growth seen in early 2026 to balance out in the second half of the year, with customer spending shifting back toward cloud, SaaS, and managed services as urgent infrastructure projects are completed.
• Geared for Growth initiative benefits: The company is counting on its Geared for Growth program—focused on AI-enabled process improvements and operational efficiency—to deliver $100 million in gross annual run rate savings by 2027, with a potential to reach $200 million by 2028, based on current line of sight. A portion of these savings will be reinvested into growth initiatives.
• Margin and supply chain risks: Leadership remains cautious about potential margin fluctuations due to product mix, supplier pricing actions, and the risk of new supply disruptions or economic slowdowns, stating that continued discipline is required to maintain efficiency and meet financial targets.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be watching (1) the pace at which CDW’s Geared for Growth initiative delivers measurable productivity and margin improvements, (2) any shifts in customer spending back toward higher-margin services and software, and (3) the company’s ability to convert backlog into revenue without further supply chain disruptions. Execution on AI-powered operational enhancements and stabilization in expense ratios will also be closely monitored.

CDW currently trades at $110.86, down from $136.80 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free).

Our Favorite Stocks Right Now

WHILE YOU’RE HERE: Top 9 Market-Beating Stocks. The best stocks don't just beat the market once. They do it again. And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.

But our AI platform says the party isn't over. Find out which 9 stocks made the cut this week - FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.

Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.